All You Need to Know About NRI Account

NRI have many options when it comes to investment and banking in India. However, NRIs often faces difficulties in managing his/her finances while earning both abroad and in India. Moreover, they also find it challenging to track the bank accounts in different countries.  Thus for the convenience of the NRIs, many financial institutions and banks in India offer the facility to open an NRI account. These accounts provide facilities with respect to the transferability of account,  denomination, tax, etc.

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In India, the NRIs can open three types of accounts i.e. NRE account, NRO account and FCNR account. Let’s read further to know in detail about different NRI account and their features and benefits. 

What is an NRI Account?

An NRI account refers to the account opened by an NRI or a Person of Indian Origin (PIO) with financial institutions or banks authorized by the Reserve Bank of India (RBI)  to provide different services.  Any individual who has been residing in a foreign country for at least 182 days in a year and has spent less than 365 days in India in the previous 2 years can open NRE, NRO or FCNR account. 

The NRIs need to understand the different features of the three bank accounts that are available to them in India. By having a proper understanding of different accounts, the NRIs can easily manage their financial obligations, work towards their investment objectives and plan their residency properly.  

Depending on the type of NRI account one wants to open, an individual can open an account either from the earnings originated from within India or from their country of residence. 

Types of  NRI Account in India

As mentioned above, there are three types of NRI account available in India i.e Non-Resident External Account (NRE), Non-Resident Ordinary Account (NRO) and Foreign Currency Non-Resident Bank Account (FCNR). Read further to know more about these accounts. 

  1. Non-Resident External Account (NRE)

    This account allows the NRIs to transfer foreign earnings to India easily. The NRIs can open an NRE account in form of savings, current, recurring deposit or fixed deposit.  It is important to note that there is no tax imposed on the interest earned from this account. Thus, the interest earned from the NRE account are tax exempted and are also easily repatriable. The individual can open an NRE account jointly with a close relative resident Indian on a former or survivor basis. 

  2. Non-Resident Ordinary Accounts (NRO)

    This account is majorly opened for depositing the income earned in India. An NRI can also deposit the foreign earnings in the NRO account. When a resident of India travels abroad for a job with a goal to stay there, his/her resident accounts are converted into an NRO account by the bank. Thus, it is important to inform the bank about the individual’s departure abroad. 

    Also, the individual should keep in mind that the NRO account can be opened in form of current, savings, fixed deposits and recurring deposits. The individual can open an NRO account jointly with a close relative resident Indian on a former or survivor basis. 

  3. Foreign Currency  Non-Resident Account (FCNR)

    The NRIs can open this account in different currencies such as Canadian Dollars, US Dollars, Australian Dollars, Sterling Pounds, Euro, Japanese Yen, etc. The NRIs can open an FCNR account in form of a term deposit for the following maturity period. 

    • 1 year and above but less than 2 years. 
    • 2 year and above but less than 3 years
    • 3 years and above but less than 4 years. 
    • 4 years and above but less than 5 years. 
    • 5 years

    It is important to note that the entire deposit i.e. the principal amount and the interest earned is taxexepted until the individual holds the NRI status and is easily repatriable. 

Difference Between the NRI Accounts

Here we have elaborately discussed the difference between the NRI accounts in a tabular form. 

Parameters 

NRE Account

NRO Account

FCNR Account 

Currency Denomination of Deposit 

Indian Rupee (INR)

Indian Rupee (INR)

USD, CAD, AUD, HKD, SGD, EUR, GBP, CHF, JPY

Types of Accounts 

NRE accounts can be opened as savings, current, recurring, and fixed deposit accounts

NRO accounts can be opened as savings, current, recurring, and fixed deposit accounts

An only term-deposit account can be opened with a minimum maturity period of 1 year.

Purpose of Account 

The NRIs can open this account to deposit the earnings originate from that individual’s country of residence in INR

The NRIs can open an NRO account to deposit the earnings originate from India in INR

The NRIs can open this account to deposit the earnings originate from an individual’s country of residence in any of the above-mentioned currency. 

Taxability 

The principal amount and interest is tax exempted 

The principal amount and interest are taxable 

The interest earned on the FCNR deposit is tax exempted. 

Joint Account Facility 

It can be opened only with other NRI

It can be opened with other NRI or an Indian  resident 

It can be opened only with other NRI

Period of Fixed Deposit 

Depends on the Bank or financial institution

Depends on the Bank or financial institution

Maturity tenure ranges on FCNR account is 1 year – 5 years.

Repatriation of Balances

The entire balance is fully repatriable 

Only the interest-earning is fully repatriable.

The entire balance is fully repatriable

Documents Required and Eligibility Criteria for Opening an NRI account

The eligibility criteria while opening an NRE, NRO and FCNR account differs from banks to banks. However, here are some of the documents that should be kept handy and the specific eligibility criteria to be followed while opening an NRI account. 

  1. Documents Required 

    • Application form
    • Employment proof
    • Passport photocopy including the details like name, address, date of passport issuance, date of birth, date of expiration of the passport, etc. 
    • KYC documents
    • Student Visa, work permit, resident visa, visa permit or employment visa

    Depending upon the bank, many other forms might be required for opening the NRI account. 

  2. Eligibility Criteria 

    • The individual should own a business, be employed or practice some form of trade in a foreign country. 
    • Government employee having diplomat passports. 
    • The student pursuing education abroad. 
    • The individual should be employed with airlines registered with foreign country, Indian navy, an oil rig, or overseas shipping companies that demands the individual to work outside India for at least 182 days. 

Who Should Open An NRI Account?

NRI accounts can be opened by NRIs who have a source of Income and who wants to park their funds.  Morfeover, the NRIs who have dependents staying in India and who wants to comes back to India after a specific tenure should consider having an NRI account.

Wrapping it Up!

Even though an NRI account can be opened by NRIs easily, it is important to take into consideration different terms and conditions of the NRE, NRO and FCNR account before opening one.

Written By: PolicyBazaar - Updated: 01 September 2021
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